Small Business and Sexual Harassment in the Workplace: A $90,000 Case

From 6 March 2023, the Fair Work Act 2009 was amended to introduce a new prohibition on protection from sexual harassment in the workplace. In short, the Act

• Prohibits sexual harassment in connection with work;
• Establishes that employers may be vicariously liable for sexual; harassment committed by employees if they do not take reasonable steps to prevent it; and
• Empowers the Fair Work Commission to handle disputes regarding sexual harassment including conciliation, mediation and where consented, arbitration.

Sexual harassment is no longer confined to discrimination jurisdictions or policy‑based responses.  It is now deemed a contravention of the Act with financial consequences, capable of being enforced through federal workplace law processes.

The Case: Mejia v Capital City Café-Bar [2026] FedCFamC2G 468 Background

A 23-year-old casual employee from Colombia was employed on a bridging visa. On 29 July 2024, she alleged that in the Café’s kitchen, the employer hugged her from behind, pressed against her, waved his wallet at her and suggested she take some money. Feeling she “had to do something to get him away from me”. The employee grabbed a $50 note and pushed the employer away, who then proceeded to kiss her on the lips.

This alleged incident took place after the employee had allegedly raised concerns about incorrect pay and the employer failing to provide her with pay slips.

Over the following days after the incident, the employer sent a series of text messages to the employee apologising for what had occurred, describing it as a “blunder”, promising it would not happen again, and asking whether the employee intended to tell his wife.

Despite pleading with her to return to work due to the Café being short staffed, the employee did not return to work after the incident. During 12 weeks of employment at the Café, the employee received only one pay slip, which was provided three days after her final shift and understated her hours worked and overstated the hourly rate she was being paid.

The Courts Decision

This judgment is the first of its kind and provides important guidance on how courts may approach sexual harassment claims under the FWA. The Federal Circuit and Family Court ordered the café director to pay approximately $90,000 in compensation and penalties. This was divided as follows:

• $30,610 for contraventions relating to underpayment and record-keeping breaches;
• $9,390 for the sexual harassment breach; and
• $50,000 in damages to compensate the employee for non-economic loss arising from the sexual harassment.

The Court considered the case both objectively and subjectively, stating that:

• the employee was a vulnerable relatively younger migrant person in a financially and socially precarious position.
• while the director had apologised in communications with the employee shortly after the incident, the messages seemed to be partly motivated by a desire to avoid disclosure and personal consequences, rather than reflecting genuine accountability. 
• The employer did not make full admissions until the day of the hearing.

The Court’s reasoning highlights the importance of genuine contrition and early admissions. Attempts to minimise or conceal misconduct may be viewed unfavourably and can influence the Court’s assessment of penalties.

Key points for Employers

1. The Fair Work Act now provides employees with another legal pathway to pursue sexual harassment claims — in addition to the Human Rights Commission and anti-discrimination processes. This increases the legal risk for employers.
2. Power imbalance matters. The court placed significant weight on the employee being a young migrant with limited financial resources whilst the employer was a business owner and in a position of authority. This highlights a major risk area for small businesses where owners/directors directly deal with employees as power imbalance increases damages.
3. Poor HR processes will increase risk and compound liability. The penalties were not just for harassment, they were for systemic non-compliance including failure to have proper policies, training, documentation, pay slips, investigation procedures, hr systems.
4. Trying to informally “fix” things after an incident can worsen legal standing. Written correspondences and apologies can become evidence. The employer’s messages apologising and asking the employee to keep the incident a secret significantly damaged the case
5. Directors, business owners, CEOs and general managers need to be aware that they can be held personally liable and ordered to pay penalties. The operation of s 550 of the Fair Work Act means that individuals involved in contraventions may be held accountable, particularly where corporate employers are unable to meet their obligations due to insolvency. 

Practical Steps for Employers

The Court’s decision demonstrates that even a single incident of sexual harassment can result in substantial financial consequences, particularly where the worker is vulnerable or there is a clear imbalance of power. All businesses, including small businesses need to have in place:

1. A clear sexual harassment policy
2. Complaint reporting procedures
3. Investigation procedures
4. Director/Manager training
5. Proper wage and payroll compliance
6. Proper employment records
7. Access to an external investigator
8. Post-investigation follow-up processes

Need Advice? 

ER Strategies are experts in employment compliance and can assist you in managing your employment compliance responsibilities. To discuss your obligations and assistance we can provide, get in touch with us at 1300 55 66 37, or click the button below.